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The Significance of Having a Financial Plan

Updated: Dec 8, 2023

The 2023 Modern Wealth Survey conducted by Schwab involved 1,000 US citizens who estimated the average net worth required to be considered wealthy in the United States. The survey concluded that an individual needs at least $2.2 million to achieve affluence. Interestingly, the survey also revealed that only around one-third (35%) of Americans have taken the time to establish their goals and create a documented financial plan. Among those who have, a significant majority, seven out of ten, reported feeling more in control of their finances, while nine out of ten expressed confidence in reaching their financial objectives.

Despite the increased flexibility for Americans these days to manage their finances and investments without traditional constraints such as high entry thresholds or elevated costs for financial services, the percentage of people attaining financial stability in retirement has remained unchanged since the time of Earl Nightingale and his renowned recording, "The Strangest Secret."

In Nightingale's audio piece, he poses the question: "If we consider 100 individuals who begin their journey at 25, what will their financial state be when they turn 65?" These individuals are filled with anticipation for life, displaying vitality, enthusiasm, and perceiving life as an exciting adventure. However, upon reaching 65, only one person will be wealthy, four will achieve financial independence, five will continue working, and a staggering 54 will be penniless, relying on others for basic needs. Shockingly, only five out of 100 individuals reach financial security. This high failure rate persists even today, despite the passage of decades since the 1950s.

In my view, the difficulties in attaining financial security do not come from a scarcity of information or the expenses incurred in conducting transactions. The key lies in the findings of the Schwab survey, which revealed that over two-thirds of Americans do not even have a rudimentary financial plan. Without a roadmap to navigate the array of financial choices, challenges, opportunities, emergencies, and impulsive purchases that arise, individuals and couples are prone to making significant financial mistakes. As a result, achieving financial security becomes an arduous endeavor, bordering on the realm of impossibility.

When it comes to individuals and couples without a plan, based on the survey, the majority cite lack of funds (44%), complexity (21%), or time constraints (20%) as reasons. Nevertheless, these justifications lack substance. The fundamental problem lies in the tendency of most people to evade accountability. It's as straightforward as that. By developing a plan, even a basic one, individuals and couples make a commitment to a particular path, thus embracing accountability.

In summary, it is crucial to have a plan and work the plan in order to increase one's chances of attaining financial security.

DISCLOSURE - All written content on this article is for information purposes only. We utilized ChatGPT and other sources for this article. Opinions expressed herein are solely those of Core Wealth Consultants. Material presented is believed to be from reliable sources, however, we make no representations as to its accuracy or completeness. Core Wealth Consultants, LLC a Registered Investment Advisor in the States of Florida, Indiana and Michigan. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Diversification and asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss.

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